Published: Mon, May 28, 2018
Business | By Pearl Harrison

Italy faces political turmoil and possible early elections after presidential veto

Italy faces political turmoil and possible early elections after presidential veto

Italian President Sergio Mattarella is expected to ask former International Monetary Fund official Carlo Cottarelli to form a temporary government, according to Reuters.

Their attempts to form a government foundered on insistence on an economics minister with anti-euro views, which Italy's president said put Italians' savings and investments at risk.

The president said he feared a new government with Mr. Savona as economy.

Conte and Mattarella had met on Sunday to discuss officials selected by the anti-establishment 5 Star Movement and the rightist League to comprise the new government cabinet for Italy, which has been without a government for 84 days, reports Efe news. "We'll see if we can start a discussion on the electoral law in parliament".

Markets gave up earlier gains as the Five Star Movement and the League raged against Mattarella, suggesting months of acrimonious political campaigning.

In his first remarks, Cottarelli sought to calm markets and Italy's European partners, assuring that his government would guarantee "prudent" management of Italy's debt, which at 132 percent of gross domestic product is Europe's heaviest after Greece.

However, Italians could be heading back to the polls as Mr Mattarella said he was considering political party leaders' requests for another election. "It's madness, and I ask the Italian people to stay close to us because I want to bring democracy back to this country", Salvini told reporters.

Italy has been without a government since elections on 4 March, at which voters flocked to anti-establishment and far-right parties.

Data last week showed German PMI data fell to a 20-month low in May indicating that economic momentum in Europe's biggest economy was faltering and European Central Bank minutes of its April meeting showed policymakers were anxious about a more pronounced slowdown in the eurozone and political uncertainty in Italy.

An administration led by Cottarelli would likely only be a short-term solution because the majority of parliamentarians have said they would not support a technocrat government.

The choice of Cottarelli, right, who met with Mattarella in Rome, could calm the markets, which had been spooked by the prospect of a Five Star-League coalition.

"Mattarella has made it clear that he will not allow any policy that could put Italy on a slippery slope towards a major confrontation with the European Union that could potentially jeopardise Italy's euro membership", said Holger Schmieding, an analyst with Berenberg.

Salvini and 5-Star Movement leader Luigi Di Maio, a fellow euroskeptic, have joined forces in hopes of giving Italy its first populist government.

However, Salvini dismissed calls on Monday by Five Star and a far-right ally, the Brothers of Italy, to chase Mattarella out of office.

Both Salvini and Di Maio had staunchly backed Savona, and pressed Mattarella regarding the proposed government team in separate meetings with the head of state earlier on Sunday afternoon. If a simple majority votes in favour, the constitutional court would then be called to decide whether to impeach or not.

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